Papillomaviruses induce proliferative epithelial lesions and can only undergo vegetative replication in terminally differentiated keratinocytes. This has hampered the study of the complete viral life cycle because of the difficulties in generating a differentiated stratified epithelium in tissue culture. Using a combination of organotypic raft cultures and xenografts on nude mice we have developed a system in which we can generate fully differentiated bovine epithelium in which BPV-1 can replicate and produce infectious viral particles. Organotypic cultures have been established with bovine keratinocytes plated on a collagen raft containing BPV-1 transformed fibroblasts. The keratinocyte monolayer was infected with virus particles isolated from a bovine wart or were transfected with cloned BPV-1 DNA. Several days after lifting the rafts to the air interface they were grafted on nude mice. After approximately six to eight weeks, large xenografts were produced that exhibited a hyperkeratotic epithelium with a large dermal fibroma. Virus particles could be isolated from these lesions and quantitated by a focus forming assay on mouse cells in culture. This system should allow genetic analysis of the roles of the viral gene products in the complete viral life cycle. In naturally-occuring bovine papillomavirus-infected wart tissue we have identified two different regions in which the E2 proteins are expressed: a low level of E2 protein is found uniformly distributed in the basal cell layer; in the stratum spinosum there are "hot spots" of E2 expression that correlate with the cells in which viral DNA amplification occurs. This suggests that levels of the E2 protein may regulate the switch to vegetative DNA replication.